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Judgment of the Court REPORT FOR THE HEARING in Case E-5/96 REQUEST to the Court under Article 34 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice by Borgarting lagmannsrett's (Borgarting Court of Appeal) for an advisory opinion in the case pending before it between Ullensaker kommune and Others and Nille AS on the interpretation of Article 11 and 13 of the EEA Agreement. I. Introduction 1. By an order dated 21 June 1996, registered at the Court on 26 June 1996, Borgarting lagmannsrett, a Norwegian Court of Appeal, made a request for an advisory opinion in a case brought before it by Ullensaker municipality, Nes municipality, Eidsvoll municipality, Sørum municipality and Sunndal municipality (the appellants) against the respondent Nille AS (Nille). By a Ruling of 2 September 1996 the appeal on the part of Sunndal municipality was terminated. II. Legal background 2. The questions submitted by the Norwegian court concern the interpretation of Article 11 and Article 13 of the EEA Agreement. 3. Article 11 EEA, which mirrors Article 30 of the EC Treaty provides: "Quantitive restrictions on imports and all measures having equivalent effect shall be prohibited between the Contracting Parties". 4. Article 13 EEA provides a derogation from Article 11 EEA under the same conditions as Article 36 EC: "The provisions of Article 11 and 12 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between the Contracting Parties". III. Facts and Procedure 5. The Case before the national Court concerns the validity of the refusal by four municipalities of applications for licences to sell videograms. According to the description of the requesting Court, the plaintiff, Nille, is a nation-wide chain of about 120 shops selling and renting out video films. Counsel for municipalities states that the sale of videos by Nille represent 3,5 % of the the total turnover of the shops. All shops have applied for a licence to sell videograms. Applications from seven shops situated in five different municipalities were refused in the autumn of 1994. The applications from the other shops were all granted. As grounds for their refusal four of the municipalities stated that the applicants did not fulfil a requirement regarding specialised dealers. In two of these municipalities, Nes and Eidsvoll, it had been expressed prior to the final administrative decisions that the requirement regarding specialised dealers was applicable to new establishments. Sunndal municipality stated that from a cultural and political point of view it must be an aim to build up local expert knowledge in the field of sale and rental of video films in the local firms that have already been granted a licence. 6. In a lawsuit before Indre Follo Herredsrett, Nille claimed that the refusals were invalid under national regulations and in conflict with Article 11 EEA . 7. The Norwegian Act No. 21 of 15 May 1987 relating to Films provides in section 2, first paragraph: "No commercial showing, sale or renting out of films or videograms may take place without a licence granted by the municipal council or whomever authorised by the municipal council. This does not apply to sale or renting out films and videograms for resale and rerental." Regarding the purpose of the provision, it is stated in Proposition No. 20 (1986-87) to the Odelsting inter alia: "In the opinion of the Ministry such a licencing system scheme would, together with the regulations on the labelling and registration of videograms, be effective in preventing the sale or rental of illegal videograms. In addition, the licencing sheme would be an important measure in the cultural policy. The municipalities may, for example, require a certain diversity in the films and videograms supplied by the applicants for licences". 8. According to the description of the Norwegian licencing scheme given by the Norwegian Government, the system is based on two main considerations. First, the municipalities regard the sale and rental of videograms as part of the general cultural activities in the municipality. The public should be supplied with a reasonable selection of films and a certain amount of guidance. It must be noted that Norway has a very scattered population. Many parts of the country have no readily available alternatives to the local shops. Videograms are regarded as such important products that the authorities wish to encourage diversity. The other main consideration on which the licencing scheme is based, is to ensure that there is control of the retail stage of the sale and rental of videograms and that sanctions can be imposed if necessary. The purpose of introducting a municipal licencing requirement for the commercial sale and rental of videograms is closely linked and in accordance with the purpose of the labelling and registration scheme, which is to prevent the sale or rental of illegal videograms. In keeping with the principle of subsidiarity, the Norwegian authorities consider it important that the various municipal administrations are given a responsible role in the implementation of these objectives. 2 9. According to Nille, the appellants have chosen to amend their municipal regulations, such that there is no longer a requirement that businesses which are to sell videograms must be so- called "specialised" dealers. The shops which are the object of the present proceedings before the national Court have received permission to sell videograms. The municipalities have nonetheless maintained the action. 10. The municipalities claim that their adminsitrative decisions do not represent any obstacle to trade. Alternatively they submit that the basic principles in the case-law of the ECJ do not prevent limitations in the selling arrangements from being allowed. 11. The County Court ruled in favour of Nille. All five municipalities appealed against this judgment to Borgarting lagmannsrett. In a written plea dated 3 June 1996, Sunndal municipality withdrew its appeal. IV. Question 12. The following question was referred to the EFTA Court: "Is Article 11 of the EEA Agreement, in conjunction with Article 13, to be understood to mean that it prohibits a municipality from refusing a permission for the retail sale of recorded video cassettes (videograms) on the grounds that such permission should only be granted to shops which can be characterised as specialised dealers (speciality shops) for videograms and/or that experts knowledge should be built up by established dealers ?" V. Written observations 13. Pursuant to Article 20 of the Statue of the EFTA Court and Article 97 of the Rules of procedure, written observations have been received from: – The appellants, Ullensaker municipality and others, represented by Counsel Morten F. Arnesen; – Nille, represented by Counsel Morten Steenstrup; – The Government of the Kingdom of Norway, represented by Hege M. Hoff, legal adviser at the Royal Ministry of Foreign Affairs, acting as agent for the Norwegian Government; – The EFTA Surveillance Authority, represented by Håkan Berglin, Director of the Legal and Executive Affairs Department, assisted by Ms. Bjarnveig Eiriksdóttir, Officer of that Department, acting as agent; – The European Commission, represented by Richard B. Wainwright, Principal Legal Adviser, and Hans Støvlbæk, Member of its Legal Service, acting as agent. 3 A. Admissibility of the second part of the question referred to the Court 14. The Counsel of the Sunndal municipality withdrew its appeal to the Borgarting Lagmannsrett before the national Court requested the EFTA Court to give an advisory opinion. The appeal case on the part of Sunndal municipality was terminated by a ruling of 2 September 1996. The appellants 15. Counsel for the appellants states that the last part of the question referred by Borgating lagmannsrett to the EFTA Court is without current legal interest, since it concerns a hypothetical question. Sunndal municipality was the only one among the appellants which, inter alia, stated as a ground for its refusal that expert knowledge should be built up by established dealers. There is no relevant legal basis for giving an opinion regarding this part of the question. The Norwegian Government 16. The Norwegian Government supports this legal opinion and requests the EFTA Court to dismiss the second part of the question as to whether Article 11 in conjunction with Article 13 EEA prohibits a municipality from refusing permission on the ground that expert knowledge should be built up by established dealers. 17. The Norwegian Government refers to Foglia1, according to which the European Court of Justice (the ECJ) has dismissed questions from the national courts in cases where no real dispute exists and the question is purely hypothetical. B. Article 11 EEA The appellants 18. The appellants do not agree that the Norwegian licencing scheme must be regarded as a measure having equivalent effect to quantitative restrictions on import under Article 11 EEA. The national law does neither prohibit nor impede import and sale of video cassettes. Neither does it demand that the goods meet certain requirements as to quality. 19. In the appellants´ view the Dassonville2 judgment does not give any guidance for the case at hand. According to this opinion, the licensing scheme is not aimed at hindering inter - state trade. Neither does the scheme and the appellants´ application of it have an effect which impedes trade in the EEA. In this connection the appellants refer to the judgment in the case of 1 Case C-104/79 Foglia I [1980] ECR 745.
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